Russia is facing the risk of a banking crisis in 2026, according to a European intelligence report obtained by Reuters. The report warns that Russian banks, used to finance the war economy, are accumulating increasingly risky loans, with around 10 percent of corporate loans already classified as doubtful and some large lenders seeing up to 15 percent of retail loans non-performing.
The mechanism is straightforward: the Russian state funds the war and maintains arms production, while banks are increasingly used to lend to defense companies and regional projects. A significant portion of these loans is subsidized by the government, which pays interest subsidies to lower the cost of credit for borrowers. A similar mechanism is applied to regular mortgage loans for households.
Despite this support, which strains the Russian budget, loan repayment performance is deteriorating. According to the report, already around 10 percent of corporate loans in Russia can be considered doubtful. Some large banks in 2025 reported retail non-performing loan ratios reaching as high as 15 percent. These levels are significantly above what is considered normal in global banking.
– The share of non-performing loans is alarmingly high – stated the intelligence report. This is partly due to state propaganda encouraging over 13 million people to hold at least three loans simultaneously.
Mechanism of the crisis
The growing number of non-performing loans means increasing losses for banks. The crisis mechanism is that if the situation does not change and losses continue to mount, they will eventually reach the level of banks’ own capital. When capital becomes negative, the banks become potential bankrupts. In theory, they could be recapitalized, but for Russia under sanctions, this would be problematic.
Consequences for the Russian economy
In such a scenario, a banking crisis is likely, which would probably mean a recession. Bailing out failing banks by injecting money from the central bank would increase the risk of inflation and, consequently, even higher interest rates that would make it harder to exit the recession.
The Russian Ministry of Economy recently lowered its official GDP growth forecast for this year from 1.3 percent to 0.4 percent, and for 2027 from 2.8 percent to 1.4 percent. These revised figures reflect the growing economic strain as the banking sector teeters on the edge.
Źródło: WNP.PL, Fot. PAP/EPA/PAVEL BYRKIN/SPUTNIK/KREMLIN POOL
